OTC Advanced:

Looking at a Potential Extension for Aaron Donald

The Los Angeles Rams suffered a rough homecoming on the field in 2016, finishing up the season with a 4-12 record. That being said, the team has a few key building blocks, starting with stud defensive tackle Aaron Donald. The two-time NFL All Pro selection has not only achieved league-wide consensus as the top defensive tackle in the NFL, but Donald also garners consideration as the overall top football player in the league. To that point, respected football site Pro Football Focus ranked Donald as its #1 overall player for 2017. So it’s fair to assert that the Rams will not allow Donald to leave anytime soon, and the team will be rewarding him with a lucrative extension. Donald skipped the OTA’s this year, sending a clear message to the Rams’ brass that he desires a contract extension prior to the start of the 2017 season. The Rams want to keep their franchise player happy, and it’s a strong bet that he will receive said extension prior to week 1.

As a former first round pick entering his fourth year in 2017, Donald’s contract is subject to a fifth year team option for 2018. In a move that surprised no one, the Rams have already picked up his fifth year option, which will pay Donald $6.892 million in 2018 (guaranteed for injury only). So Donald’s salaries are set for the next two years, but both the team and the player can benefit here by entering into a long term extension that will tie Donald to the Rams for years to come.

Before we move forward with constructing a contract extension for Aaron Donald, note that we have precedent with respect to the Rams extending their first round draft picks prior to the start of their fourth year, and doing so on lucrative terms. First, defensive end (now outside linebacker) Robert Quinn signed a four year, $57 million extension with the team in 2014, just as he was about to play his fourth season with the team. More recently, gadget receiver Tavon Austin signed a four year, $42 million extension with the Rams in 2016, also entering into his fourth season. Both contracts were viewed around the league as overpays, albeit Austin’s contract substantially more so than Quinn’s deal. The takeaways here – the Rams have a history of entering into extensions during a first round pick’s fourth year with the team, and they pay towards the top of the market. Remember this as we move forward.

Now let’s return to the task at hand. When projecting a new contract for a quarterback, you need to look at the contracts of other comparable quarterbacks as the point of reference, and the same deal with wide receivers, cornerbacks, etc. So the next step here is to review recent contracts for top defensive tackles and use those deals as the starting point for Donald – with one caveat. With a generational talent such as Donald, merely looking at the top defensive tackle contracts doesn’t by itself provide you with the information necessary to reach a deal. In this case, Donald’s proper comps are the deals for the top defensive lineman, with the inclusion of the league’s highest paid non-lineman defensive player (Von Miller) as well, since we’re talking about potentially the league’s best player in Donald. Certainly Donald’s negotiating team will take this approach, and it’s not an unfair position. With that said, we’ll take a look at the contracts for the following three defensive linemen – Ndamukong Suh, JJ Watt and Fletcher Cox – and the aforementioned linebacker Von Miller. The key terms of the contracts for each player are as follows:

Player

Contract

Additional Details

Ndamukong Suh, Miami Dolphins defensive tackle

6 years, $114.375M signed in 2015

AAV: $19.0625

2015 Salary cap: $143.28M

% of cap: 13.30%

$59.995 million fully guaranteed upon signing, including a $25.5 million signing bonus and his base salaries from 2015 through 2017 guaranteed.

JJ Watt, Houston Texans defensive end

6 years, $100M extension signed in 2014 (kicked in for 2016)

AAV: $16.67M

2014 Salary cap: $133M

% of cap: 12.53%

$20.876 million fully guaranteed, including a $10 million signing bonus and guaranteed salaries in 2014 and 2015. Also at time of signing, was expected to achieve (1) $10 million roster bonus and (2) 2016 and 2017 base salaries becoming fully guaranteed

Fletcher Cox, Philadelphia Eagles defensive tackle

6 years, $102.6M extension signed in 2016 (kicked in for 2017)

AAV: $17.1M

2016 Salary cap: $155.27

% of cap: $9.08%

$36.299 million fully guaranteed, including $26 million signing bonus and $6 million option bonus; $63.299 million is guaranteed for injury

Von Miller, Denver Broncos outside linebacker (3-4)

6 years, $114.5M signed in 2016

AAV: $19.08M

2016 Salary cap: $155.27M

% of cap: 12.29%

$36.5 million fully guaranteed, including $17.5 million signing bonus, $6 million roster bonus, and base salaries in 2016 and 2017; up to $70 million total guarantees

Looking at the key terms of the contracts above, we have Ndamukong Suh and Von Miller setting the goal posts with AAVs of just over $19M per season, with Suh’s contract also setting the mark with the highest percentage of cap at time of signing (13.30%). JJ Watt’s deal comes in a bit lower than Suh and Miller, but it’s important to note that Watt never hit free agent status, unlike Suh, nor did he complete his contract as Miller did (albeit with Miller receiving the franchise tag prior to negotiating his new deal). Watt entering into an extension prior to hitting free agency explains why his contract numbers are lower, despite universally being considered the league’s best defensive player as recently as two years ago. Fletcher Cox is an outstanding player in his own right, but he trails a bit in league standing in comparison to the other three players here. This, plus the fact that he also entered into an extension, explains why Cox’s contract lags behind the rest of the group.

Now assuming Donald enters into an extension this year, we know that he will not be hitting free agency at the time he receives his second contract, as he has (i) the last base year of his rookie contract in 2017, (ii) the team option in 2018 and (iii) the franchise tag hovering over him for 2019. This means that Donald’s bargaining power, while powerful, is not unlimited. We’ll take a closer look at what exactly this means in the next paragraph. On the flip side, Donald has no less cache than Suh, Watt and Miller had when signing their deals, so it’s safe to expect that his numbers will comfortably surpass Cox’s contract and slot in closer to Suh and Miller. Donald’s contract status most closely resembles Watt’s, and as such, Watt’s contract remains highly relevant with respect to the cap percentage and deal structure, just with a slightly outdated AAV with the extension having been signed three years ago.

Let’s take a close look at the one key piece of leverage for the Rams – who need whatever leverage they have to keep extension terms within the stratosphere. Donald remains subject to his rookie contract, and thereby under Rams control, for at least the next three years per the terms of the collective bargaining agreement. Specifically, Donald’s subject to the following salaries:

The Rams could actually control Donald’s salary for 2020 as well by slapping the franchise tag on him for a second year in a row, which would come at 120% of the 2019 value. However, for purposes of this article, we’ll keep it simple and consider Donald’s contract subject to Rams’ control for the next three years. What this means is that the Rams can hardwire Donald’s cost for the next three years at a total fixed amount equaling roughly $24 million. This point likely will, or at least should, keep Donald from eclipsing Ndamukong Suh’s numbers, even though Donald is by most accounts considered the superior player.

Having considered the Rams’ period of contractual control, along with Donald’s comps around the league and his status as a generational player, let’s move ahead and work out an extension for Donald. Factoring in the collective points, reasonable terms for Donald’s extension would be as follows:

Aaron Donald, Los Angeles Rams

5 years, $100M extension; to be signed in 2017 and kick in for 2019

AAV: $20.0M

2017 Salary cap: $167M

% of cap: 12.57%

$41 million fully guaranteed, comprising of $10 million signing bonus, $2 million 2017 roster bonus, $12 million 2018 roster bonus and $17 million in base salary, all guaranteed; $4 million March roster bonus for 2021 (not guaranteed); $70 million guaranteed for injury

Donald’s proposed numbers don’t match the cap percentage or fully guaranteed dollars for Suh, but as explained above, that’s to be expected since Donald is years away from free agency. However, his AAV exceeds that of Suh, since the cap has gone up substantially since Suh signed his deal. Donald’s deal compares closely to that of Von Miller, slightly ahead on AAV and cap percentage. Cox’s deals is left in the rear view mirror by Donald’s extension terms, which is to be expected – no disrespect to Cox. We’ll explore how Donald’s contract compares to JJ Watt momentarily.

First, Donald’s cash flow through 2023, with his existing deal plus the proposed contract extension in hand would be as follows:

Year

Base Salary (Gtd.)

SB

RB

Cap

Dead

Saved

Running Cash

2017

$1,802,250

($1,802,250)*

$3,423,000

$2,000,000 ($2,000,000)****

$7,225,250

$44,225,250

-$37,000,000

$13,802,250

2018

$6,892,000

$2,000,000

$12,000,000 ($12,000,000)****

$20,892,000

$37,000,000

-$16,108,000

$34,694,250

2019

$10,000,000

($10,000,000)**

$2,000,000

$0

$12,000,000

$23,000,000

-$11,000,000

$44,694,250

2020

$12,000,000

($7,000,000)**

$2,000,000

$0

$14,000,000

$11,000,000

$3,000,000

$56,694,250

2021

$15,000,000***

$2,000,000

$2,000,000

$19,000,000

$2,000,000

$17,000,000

$73,694,250

2022

$18,000,000***

$0

$0

$18,000,000

$0

$18,000,000

$91,694,250

2023

$19,000,000

$0

$0

$19,000,000

$0

$19,000,000

$110,694,250

* Fully guaranteed base salary from rookie contract

** Fully guaranteed base salary from contract extension

*** Full 2021 base salary and $14 million of 2022 base salary guaranteed for injury

**** Full 2017 and 2018 roster bonuses guaranteed

This deal puts $12 million into Donald’s bank account immediately via the signing bonus ($10 million) and roster bonus ($2 million), and the extension portion of the contract elevates him to the throne for highest non-QB AAV. Note that with respect to 2017, the prorated signing bonus from the extension ($2 million) has been added to the carryover signing bonus amount from Donald’s rookie deal. In addition, be aware that the signing bonus can only be prorated a maximum of five years, so 2022 and 2013 won’t be subject to signing bonus proration. Donald’s base salaries from 2017 and 2018 remain intact, but with a running cash flow of more than $30 million even before the extension years kick in. Both the base salary guarantees and the resulting dead money charges make this a de facto guaranteed contract through 2020, and then a pay-as-you-go structure for the last three years. The $2 million roster bonus in 2021, in this case to be due in March, should cause the Rams to make an early decision on whether or not to keep Donald for the 2021 season. This helps protect Donald from having to look for another team post-free agency, when most teams have already spent their cap allotments.

JJ Watt’s contract is the most relevant comparison to Donald’s pact, as the extension would come at the same juncture of Donald’s career with respect to the collective bargaining agreement (fourth year to be played, fifth year team option to be applied, etc.), and Watt carried the moniker or “best defensive player in NFL” during negotiation time, as Donald does now. Under this proposed deal, the cap percentage for the players’ deals are nearly identical, with Watt’s deal at 12.53% and Donald’s at 12.57%. And as you can see below with the cash flow, strictly with respect to money from the extensions (i.e. no carryover from the first NFL contracts), Watt and Donald get paid as follows:

Player

Year 0*

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

JJ Watt

$22,000,000

$32,500,000

$43,000,000

$54,000,000

$67,000,000

$82,500,000

$100,000,000

Aaron Donald

$24,000,000

$34,000,000

$46,000,000

$63,000,000

$81,000,000

$100,000,000

—

*In each case, encompasses the two years prior to the start of the extensions.

Comparing the cash numbers, Watts actually has the more favorable numbers up through Year 2, once you factor in the difference in cap percentage from 2014 versus 2017. Donald’s payout wins from Year 3 on, and especially so if he gets to see the last two years of his deal. This deal actually works out nicely for both Donald and the Rams – Donald can rightly claim that his yearly payout exceeded that of Watt, while the team can take solace in the fact that they’re paying less from a cap percentage standpoint to Donald in the early years, with the ability to cut Donald with minimal problems in the last three years of the deal.

One quick but important point to note with long term extensions such as this one is the necessity to comply with the final league year rule. The relevant provision in the CBA essentially states that for any player under contract in the final league year (in this case 2020) and whose contract extends beyond that season, the player cannot earn a salary increase of more than 30% of his 2020 salary. This especially becomes a factor with superstar players such as Donald, where the deals stretch out for several years, and the last few years of such deals often contain large salaries. Looking at the proposed terms above, this contract is in compliance with the final league year rule, since 1) Donald’s 2021 salary of $15 million is within 30% of his 2020 salary of $12 million, 2) Donald’s 2022 salary of $18 million is within 30% of his 2021 salary, and 3) Donald’s 2023 salary of $19 million is within 30% of his 2022 salary. This provision does make it much harder to backload salaries in the last few years of the deal (where in many cases it’s not expected for the player to earn such salaries). The final league year rule is an important side issue to be aware of with NFL contracts, and in this case the proposed terms are compliant with the rule.

There you have it – this deal represents a fair pact for both Donald and the Rams. Donald will be set for life with top of the market terms, which is great considering he’s still years away before he can hit unrestricted free agency. For the Rams, the team receives cost certainty and pays out on a fair contract that also accounts for the team’s control of Donald’s contract through the next three years. Also, . As the Rams prepare to rebuild their fan base in Los Angeles before moving into the new Inglewood palace in 2020, it’s imperative that Donald’s tenure be set with the team for years to come. This extension benefits all parties involved.